The Hon’ble High Court of Madras vide its order dated 29.09.2022 in the matter of M/s J.K. Constructions Vs. The Chief Engineer & Others in W.P.Nos.30891, 30894 & 30897 of 2019 And WMP.Nos.30980, 30982 & 30985 of 2019, allowed the writ petitions filed by the assessee, wherein it was contended by the assessee that the difference in tax liability after the introduction of GST has to be made good by the purchaser as per the Government orders.

Facts of the Case: –

• The petitioner is a contractor for National Highways and Public Works Department (PWD) of the State of Tamil Nadu.
• There is no dispute that the contracts in respect of which the liability has arisen, were entered before the introduction of GST.
• The Finance Department issued two Government Orders viz., one in G.O.Ms.No.264, Finance (Salaries) Department dated 15.09.2017 and the second in G.O.Ms.No.296, Finance (Salaries) Department dated 09.10.2017, to ease transition from the era Value Added Tax (VAT) to Goods and Service Tax (GST) and in the interests of clarity.
• The aforesaid Government orders provides for methodology of computation of GST liability in respect of contracts executed prior to 01.07.2017 and make it clear that any difference in liability shall be made good by the purchaser, which in this case is, the Highways and Public Works departments.
• That in the instant case, the turnover from the contract was liable to VAT at the rate of @2% prior to 01.07.2017, however after the introduction of GST became liable at the rate of 12%.

The case of the petitioner is that the difference in tax liability must be met by the respective purchasers as per the aforesaid Government orders.

On, the other hand it was agreed on the behalf of the respondents, the Highways and Public Works Department that the methodology for computation of GST would be as per G.O.Ms.Nos.264 and 296.

Held: –

• The Hon’ble Court after considering the submissions made and the facts of the case found that the issue in these writ petitions relates to the liability of commercial taxes after the introduction of Goods and Service Tax, with effect from 01.07.2017.
• It is not in dispute that the contracts in respect of which the liability arise were entered into on 17.04.2017, 16.04.2017 & 31.03.2017 in W.P.Nos.30891, 30894 & 30897 of 2019 respectively, W.P.Nos.30891 and 30897 of 2019 with the Highways department and W.P.No.30894 of 2019 with the PWD.
• It was found by the Hon’ble Court that the aforesaid GOMs. No. 264 dated 15.09.2017 and G.O.Ms.No.296 dated 09.10.2017 refer to the methodology of computation in respect of contracts that were existing on the date of introduction of GST. Thus, there is no doubt in the mind, and the same has been agreed upon on the behalf of the respondents, the Highways and Public Works Department, that the methodology for computation of GST would be as per G.O.Ms.Nos.264 and 296.
• Further, it was found that the aforesaid Government orders in the interests of clarity have been consistently applied in computation of liability in cases of contracts entered into prior to 01.07.2017. This Court, in orders dated 04.04.2022 in W.P.Nos.34682 and 34687 of 2019 and dated 28.08.2019 in W.P.No.25450 of 2019 have also reiterated the same position.
• Thereafter, the Hon’ble Court taking note of para 6 & 10 of the G.O.Ms.No.296, wherein the methodology of such computation is explained, found that admittedly, there has been no challenge to the aforesaid Government orders. Hence, the same are liable to be applied to the instant transactions/contract without demur.

The Hon’ble Court with the above findings allowed the writ petitions by setting aside and quashing the impugned orders in W.P.Nos.30891 & 30897 rejecting the request of the petitioner for application and adoption of the computational methodology of the aforesaid G.O.Ms. as well as the Mandamus as sought in W.P.No.30894 of 2019 was issued.  It was directed to determine the liability of the petitioner and the respondents conjointly in view of above, any recovery affected from the petitioner contrary to the methodology set out under the aforesaid G.O.'s shall be refunded to the petitioner.